Second Home Mortgages
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If you’re thinking about buying an additional property, whether it’s for a holiday retreat, a buy-to-let, or an investment opportunity, you’ll likely need a second home mortgage. Buying a second property comes with unique considerations, from larger deposits to higher stamp duty rates. Below, we’ll guide you through the details, drawing useful insights from various sources to help you make the most informed decision.
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Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
06.11.2024
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
06.11.2024
What is a Second Home Mortgage?
A second home mortgage is a loan specifically for purchasing a property in addition to your main residence. This could be a holiday home, a buy-to-let, or even a property you’re planning to use as an investment. Lenders tend to view second homes as higher risk, so you may find stricter lending criteria compared to your first mortgage. You will typically need a larger deposit and may face higher interest rates.
Can I Get a Mortgage to Buy a Second Home?
Yes, you can, but the requirements can be tougher than your first mortgage. Lenders will want to ensure that you can manage payments on both properties. Most lenders will check:
- Your income and financial commitments.
- Your credit score to assess your ability to manage additional debt.
- Whether you have enough equity or savings for a deposit, often ranging from 15% to 25% for second homes.
While it may seem daunting, with proper financial planning and by comparing options, getting a second home mortgage is very achievable.
Today’s best buy mortgages
Latest mortgage best buys
Based on a mortgage of £300,000 at 75% LTV and 25 years
| Speak with Us | Interest Rate | Mortgage Type | Monthly Repayment Amount | Total Fees | Max LTV |
|---|---|---|---|---|---|
 | 3.79% | Fixed | £1,174 | £30 | 75% |
| 4.09% | Fixed | £1,198 | £0 | 75% |
| 4.12% | Fixed | £1,210 | £1,499 | 75% |
| 4.24% | Fixed | £1,224 | £1,025 | 75% |
Is There a Specific Type of Mortgage for a Second Home?
The type of mortgage you need depends on the purpose of your second property:
Buying a Second Home to Live In
If you’re buying a home to live in, such as a holiday retreat, you’ll typically apply for a second residential mortgage. It works similarly to your first mortgage, but lenders often require higher deposits and offer higher interest rates due to the perceived risk of managing two properties.
Buying a Property to Rent Out
If you plan to rent out the property, either on a long-term basis or as a holiday let, you will likely need a buy-to-let mortgage. This type of mortgage has different criteria, including considering potential rental income. Lenders usually require a higher deposit for buy-to-let properties, often at least 25% of the property value. Some lenders may ask for as much as 40%.
Overseas Mortgage
Purchasing property abroad is another option for those considering second homes. However, buying overseas can introduce more complexity due to fluctuating exchange rates and differing regulations. You may need an overseas mortgage from a lender specialising in foreign properties.
How to Compare Second-Home Mortgage Deals
To find the best second home mortgage deal, you’ll want to compare offers from multiple lenders. Here are some key factors to consider:
- Interest Rates: Fixed vs variable rates. Fixed gives you consistency, while variable might offer lower rates at first but can fluctuate.
- Deposit: Most lenders require a higher deposit for a second home, usually between 15%-25%.
- Affordability: Lenders will assess your existing mortgage, income, and expenses to decide how much you can borrow.
- Stamp Duty Costs: Consider that stamp duty is higher for second homes.
A second home mortgage calculator can help estimate your repayments and see how different rates will impact your monthly payments.
Mortgage Affordability Calculator
Use this calculator to determine how much you could potentially borrow for a mortgage, based on the typical salary multiples used by most UK lenders.
Get expert advice immediately if...
- You need to borrow more than 4.5 times your annual income
- You are only using one income on your application
- You earn income through sources such as Benefits, Commission or Rental income
- You consider yourself to be on ‘low’ income
If one or more of the above apply to you, it’s important to get expert advice before making an application. The right broker can help maximise your chances of approval based on your circumstance.
How Much Deposit is Needed for a Second Home?
For most second home purchases, lenders will ask for a deposit of at least 15% to 25%, depending on the property’s value and your financial situation. Larger deposits can also help you secure better second home mortgage rates.
How Much Stamp Duty Do I Pay on a Second Home?
When you buy a second home, you’ll need to pay an additional rate of stamp duty. You’ll pay an additional 3% on top of the standard rates. Here’s a breakdown:
Property Price | Standard Rate | Second Home Rate |
Up to £250,000 | 0% | 3% |
£250,001 – £925,000 | 5% | 8% |
£925,001 – £1.5 million | 10% | 13% |
Over £1.5 million | 12% | 15% |
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FAQ
01/ How many mortgages can I have?
Technically, there’s no limit to how many mortgages you can have. However, each application will be assessed based on affordability and financial risk. Some lenders may have stricter criteria after the second mortgage.
02/ Can I get a second home mortgage if I’m older?
Yes, many lenders offer second home mortgages for older borrowers, but they may have upper age limits, often between 70-75 years. If you’re over the age limit for traditional products, specialist lenders or brokers may have more flexible solutions.
03/ Why are interest rates for second-home mortgages more expensive?
Lenders view second homes as a higher risk due to the potential of financial strain, so they often apply higher interest rates compared to primary residential mortgages.
04/ Can I get a mortgage to buy a third property?
Yes, though it becomes more difficult with each additional property. Lenders will closely scrutinise your financial situation, ensuring that you can handle multiple mortgages.
05/ What is the minimum deposit for a second mortgage?
The minimum deposit for a second home is typically 15%, though some lenders may ask for 25% or more, particularly for higher-value properties or buy-to-let properties.
06/ Do lenders allow borrowers with bad credit to qualify for a second home mortgage?
It’s possible to get a second home mortgage with bad credit, though your options will be limited. You may need a larger deposit and should expect higher interest rates. Speaking with a mortgage broker who specialises in adverse credit can help you find the best options.
07/ Will a second home mortgage affect my first mortgage?
Taking out a second home mortgage won’t directly affect your first mortgage, but your overall affordability will be assessed based on both payments. Lenders will want to ensure you can comfortably afford both mortgages.
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Legal
Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. We may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT
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